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L1 - Environmental Economics (Map26)

1. Environmental economics is concerned with the relationship between the economy and the environment/natural resources and how to allocate resources to achieve a balance between economic and environmental goals. It studies issues like natural resources, agriculture/food, pollution, climate change, and the connections between development, poverty, and the environment. 2. Environmental problems persist because of negative externalities where pollution costs are not borne by producers and public goods are underprovided. Market failures occur because pollution is cheap to emit and recycling/waste reduction incurs costs. 3. Solutions include assigning property rights, regulations/incentives, and internalizing externalities by making polluters pay compensation. Mitigation policies aim to reduce emissions while adaptation focuses on

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39 views28 pages

L1 - Environmental Economics (Map26)

1. Environmental economics is concerned with the relationship between the economy and the environment/natural resources and how to allocate resources to achieve a balance between economic and environmental goals. It studies issues like natural resources, agriculture/food, pollution, climate change, and the connections between development, poverty, and the environment. 2. Environmental problems persist because of negative externalities where pollution costs are not borne by producers and public goods are underprovided. Market failures occur because pollution is cheap to emit and recycling/waste reduction incurs costs. 3. Solutions include assigning property rights, regulations/incentives, and internalizing externalities by making polluters pay compensation. Mitigation policies aim to reduce emissions while adaptation focuses on

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dpsmafia
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© © All Rights Reserved
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Introduction to Environmental

Economics
Dr. Maria Plotnikova
Lake Baikal pulp and paper mill
Readings

Economics of the Environment

Heal, eoffre!, "limate Economics, #$.#%.&##' ( the article can )e found under
Environment *opic on vo+eu.org

,ara, Michael, Is the lo)al "ar)on Market ,orking- .&##/0 1ature, vol. 2234'
pp. 3$3(3$%

Economics of Rec!cling and ,aste

,ilson, David et al .&##$0 Building Rec!cling Rates through the Informal 5ector,
,aste Management &$, pp. %&$(%63

7ahmi, ,ael, and 8eith 5utton .&##%0 "airo9s :a)aleen ar)age Rec!clers;
Multi(1ationals9 *akeover and state Relocation Plans, Ha)itat International 6#,
pp. '#$('6/
Introduction

,hat is Environmental Economics-

concerned <ith relations )et<een the


econom! and the environment4natural
resources and <a!s to allocate resources,
regulate economic activit! to achieve a
)alance )et<een economic, environmental
and other potentiall! conflicting goals of
societ!

,h! do Environmental Pro)lems persist-


,hat does Environmental
Economics stud!-

1atural Resources; Depleta)le,


rene<a)le, non(rene<a)le resources

=gricultural > 7ood Economics

Rene<a)le, "ommon propert! resources


.fisheries, <ildlife0

Biodiversit!

Pollution, climate change

"onnections )et<een Development,


Povert!, Environment
Environment as an asset

Economics vie<s environment as an asset


that produces .environmental0 services

Positive economics .descri)es cause and


effect, value(free0

1ormative Economics ? value(laden

5ustaina)ilit!
5ustaina)ilit!

=t minimum the future generations should )e left


no <orse off than current generations

5ustaina)ilit! as a non(decreasing <ell()eing .the


value of total capital stock@naturalAhuman(made
should not decline0

5ustaina)ilit! as nondeclining value of natural capital


.assumes that natural and human(made capital are
not ver! su)stituta)le0

5ustaina)ilit! as nondeclining ph!sical service flo<s


from selected resources
,h! do environmental pro)lems
persist-

1egative e+ternalities

"onsumers demand the good

Producers produce and pollute <hen it is the


cheapest <a! to dispose of <aste

Man! environmental goods have features


of pu)lic goodsB pu)lic goods are
underprovided for

5olutions-
E+ternalities as a source of market
failure
=n externality e+ists <henever the <elfare
of some agent, either a firm or household
is affected )! actions of some other
agents. *here are positive and negative
e+ternalities.
1egative e+ternalit!
Cnder market allocation

*he output of the commodit! causing pollution


e+ternalit! is too large

*oo much pollution is produced

*he prices of products responsi)le for pollution are


too lo<

=s long as costs are e+ternal no incentives to search


for <a!s to !ield less pollution per unit of output

5ince release of pollutants into the environment is


cheap, rec!cling and reuse of pollutants is not done
as it incurs cost
Positive e+ternalit!

E+ternal )enefit4reduction of cost at no


cost to the recipient

InternaliDing e+ternalities; the )eneficiar!


should compensate the source of positive
e+ternalit!

1et<ork e+ternalities; connection to


net<ork of individual user increases
)enefits to all users
5olutions

Cnderstand institutional set(up

Increase environmental consciousness

.Re0=ssign propert! rights

Regulation, incentives structure aimed at


desired outcomes vis(E(vis environment
Pu)lic oods

1on(Rival

1on(E+cluda)le

E+amples of Pu)lic oods

1ational defence

ImmuniDation

=ir, <ater Fualit!

*ransportation infrastructure .lighthouse0

Research and Development, Education-

,ould private provision of pu)lic goods !ield efficient


allocation- ? 1o, usuall! underprovided
Cnder(provision of Pu)lic goods

Inefficient .lo<er0 provision of pu)lic goods


occurs )ecause each one is a)le to )ecome free
rider on each otherGs contri)ution

"onsumers capture the )enefit provided )!


other people )ecause of non(rival, non(
e+cluda)le properties of pu)lic goods

think <h! fire<orks are usuall! done )! municipalities


and not private firms

free(riding from nonrival, hard(to(e+clude


consumption
Mitigation vs. =daptation policies

Pollution )! one countr! imposes a ?ve e+ternalit! on


neigh)ouring countries

Mitigation action )! one countr! imposes a Ave


e+ternalit! on other countries

=daptation is a geographicall!(specific polic! .local


pu)lic good0
Mitigation

=fforestation4decrease in deforestation
has added )enefit of preserving
)iodiversit!

car)on market; industrial enterprises )u!


car)on .permits0 from farmers that create
car)on sinks
Carbon Dioxide Emission Estimates from Fossil-Fuel Burning,
Hydraulic Cement Production, and Gas Flaring for 199
5ource; "ar)on Dio+ide Information
anal!sis "entre, C.5. Dept of Energ!
*op &# Emitting "ountries )! *otal 7ossil(
7uel "H& Emissions for &##%
.I0 "hina
.&0 Cnited 5tates of =merica
.60 Russian 7ederation
.20 India
.30 Japan
.%0 erman!
./0 Cnited 8ingdom
.'0 "anada
.$0 5outh 8orea
.I#0 Ital!
.II0 Islamic Repu)lic of Iran
.I&0 Me+ico
.I60 5outh =frica
.I20 7rance
.I30 5audi =ra)ia
.I%0 =ustralia
.I/0 BraDil
.I'0 5pain
.I$0 Indonesia
.&#0 Ckraine
5ource; "ar)on Dio+ide Information
anal!sis "entre, C.5. Dept of Energ!
Histor! of Environmental
agreements

I$$& Earth 5ummit in Rio de Janeiro

8!oto Protocol top(do<n approach ? <ill


e+pire in &#I&

1o specific targets for developing countries

C5, =ustralia did not ratif! 8!oto )ecause of


no caps on developing countriesG emissions
5ource; "ar)on Dio+ide Information
=nal!sis "entre, C.5. Dept of Energ!
lo)al "limate "hange Polic!
Institutions

!ntergo"ernmental Panel on Climate C#ange $!PCC%


evaluates scientific evidence on climate change

&nited 'ations Frame(or) Con"ention on Climate C#ange


$&'FCCC%
a frame<ork document produced at Rio I$$& summit, set forth conference
of parties ."HP0 annual meetings to oversee implementation

*#e +yoto Protocol


limits on total emissions )! the industrialiDed countries, esta)lishing a
prescri)ed num)er of Kemission unitsK

!nternational Emissions *rading

E& Emissions *rading ,c#eme


Kcap(and(tradeK scheme

-oint !m.lementation
IndustrialiDed countr! can invest in an emission reduction proLect in another
industrialiDed countr! and get credits

Clean De"elo.ment /ec#anism


industrialiDed countr! can invest in an emission reduction proLect in a developing
countr! and o)tains credits
"openhagen C1 "limate "hange
conference

Cnlike the 8!oto accord, it leaves up to the overnments


to introduce climate actions ? )ottom(up approach

= stand(off )et<een developing and developed countries

"hina does strongl! oppose that its emission cuts )e monitored


and verified

BraDil; developed nations should pa! its Mhistoric de)tN ? more


financial support for developing countries esp. to prevent
deforestation in the =maDon region

Hppose legall! )inding promises as these <ould hamper


economic development
"openhagen

*echnolog! *ransfer for Developing


countries

"hina <ants developed countries to commit


IO of their DP to fund climate change(
mitigation activities

,estern companies are <orried a)out


intellectual propert! rights in technolog!
transfer
"onservation vs. eoengineering
5lo< glo)al <arming
through reduced
consumption, increased
energ! efficienc!
the use of human(made changes to
the Earth9s land, seas, atmosphere

atmospheric seeding; release


sulfur particles or other aerosols
into the atmosphere to reflect the
sun9s ra!s )ack into space ( same
as <hat happens <hen volcanoes
eruptB

But sulfur seeding could destro!


atmospheric oDone

Hcean fertiliDation <ith iron to


increase uptake of "#& from the
atmosphere

a rise in iron(limited ph!toplankton


populations has adverse
conseFuences

eological "ar)on seFuestration


and storage on a smaller scale
"limate sceptics

BLorn Lom)erg; M7or the most of the <orld


population, the environment is a distant
thing. In order to make them care for the
environment the same <a! <e do in the
,est, <e have to make sure that their kids
stop d!ingN

"limate(Industrial "omple+

Mone! should )e spent on R>D

Bring "ost(Benefit, cost(effectiveness into


environmental de)ate
"orporate Environmentalism

reen<ash; companies recogniDe the


consumers are <illing to pa! a premium
on MgreenN products

Mselective disclosure of positive


information a)out a compan!Gs
environmental or social performance,
<ithout full disclosure of negative
information on these dimensionsN .L!onn,
Ma+<ell, &##30

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